Polish law finally allows for the wider use of off-grid energy. This solution can be applied en masse and benefits renewable energy producers and large energy consumers. It thus opens up new investment opportunities and can accelerate the energy transition.
End of grid monopoly in Poland
The demand for energy in Poland is growing. Energy prices have also been rising for several years. Energy consumers are therefore looking for ways to reduce energy costs. From September 2023, new provisions of the Energy Law enter into force, which will help to put an end to the grid energy monopoly. They allow for the sale of energy directly by generators and energy consumers and save on distribution charges. They create an opportunity for the development of renewable energy sources and savings for large energy consumers.
An alternative to grid energy
Until now, the regulations have provided for a limited choice: either you consume energy from the grid or you have to rely on your own energy source (off-grid) exclusively. Hence, consumers did not take this choice into account. They could not afford a potential downtime caused by a lack of electricity, a situation that cannot be avoided when using solar or wind energy.
Therefore, consumers had no choice but to use energy from the grid and pay distribution charges. In theory there was a regulation on direct belt between the power station and point of consumption of energy. However, permission for construction of the belt required the consumers to give up energy from the grid. Therefore, until 2023 the Energy Regulatory Office did not issue a single permit for the construction of a direct belt.
The energy market used to look like this: all the generated energy was fed into and drawn from the grid. This solution favoured distribution system operators, though it was detrimental to small-scale producers (wind and solar power plants) and large energy consumers such as factories, production plants, warehouses or server rooms. These entrepreneurs could not even use the energy from their own solar panels without the intermediation of the grid. As a result, few of them used the roofs of their buildings or factory grounds for renewable energy sources.
Direct belt – the legal solution of sale of energy directly to business
The grid monopoly continued in Poland for many years despite the fact that as early as in 2019 an EU directive stipulated that consumers could use private energy sources independently of grid energy (Article 7(3) of Directive 2019/944). The introduction of legislation in accordance with the directive could have freed up the energy market and reduced prices, but works on the new regulations were time-consuming. Finally, the changes to the energy law were passed and will take effect as early as in September.
The possibility to use energy without the need to connect with the grid is referred to in the legislation as a 'direct belt'. This is the connection through which energy goes directly from the power plant to the energy consumer. Such a connection enables:
- a reduction in distribution charges by more than 50%,
- independent negotiations of energy prices and payment terms with the power plant owner,
- acquisition of green energy in fact and not just on a certificate of origin.
A direct belt therefore allows for a long-term cost reduction. Energy drawn through such a belt will be exempt from the fixed distribution charge and half of the variable charge rate.
The direct line is also a solution to the difficulties faced by those investing in renewable energy sources. The distribution grid in Poland was built decades ago and is not adapted to the current number of power sources and consumers. Therefore, transmission companies refuse to connect new renewable energy sources to their grid. Instead, on windy or sunny days they turn off the possibility to feed the grid with energy from wind or solar farms due to overproduction. None of these problems occurs with a direct belt. This is because it does not require grid connection conditions and the problem of overproduction can be solved by storing energy or running a direct belt to several consumers.
How to use the direct line and reduce your bills
In the first place a direct line is a solution for renewable energy producers and larger energy consumers. They can benefit from the new legislation by building a power belt that connects energy sources to consumers. Such an investment can be profitable especially for consumers whose energy consumption points are located close to wind or solar power plants. Consumers who can use their land or roofs as their own energy source can also benefit from a direct belt.
In order to use a direct belt and, at the same time, be able to take energy from the grid, it is necessary to install an interlocker, i.e. an installation that blocks the entry of the consumer's energy from the direct line into the grid. Otherwise, the consumer needs an electricity trading licence, which will increase the costs of the direct belt. Therefore, the direct belt will be the most cost-effective if an interlocker is used. The energy source must then be matched in production profile and power output to the consumption of the entities connected to the direct belt.
The construction of a direct belt requires registration on a list of such connections maintained by the Energy Regulatory Office, which is in turn effected upon satisfaction of certain conditions stipulated in the Energy Law Act. Most of these are technical in nature. The requirement for an expert report on the absence of negative impact of the direct belt on the electricity system may pose a risk. The expert report should be drawn up by a professional body. If it does not convince the authority, the Energy Regulatory Office may refuse to register the belt. Such an expert opinion is not required for connection to renewable energy sources with an output of less than 2 megawatts.
Summary
Poland's largest power plants use coal and were built decades ago. New large power plants using other fuels still need a couple of years to be built. Therefore, legislators are looking for solutions to fill the current gap in the Polish energy balance.
On the consumer market, this gap has been filled by the development of small solar installations on houses. These installations have already reached a combined capacity of more than 9 gigawatts. Installations producing energy for business are waiting for such a development. Direct line regulations could be its accelerator.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
